As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Risk Alert - (GILD) and (FXY) ? TAKE PROFITS
Sell the Gilead Sciences (GILD) February, 2015 $87.50-$92.50 in-the-money bear put spread an Currency Shares Japanese Yen Trust (FXY) February, 2015 $84-$87 in-the-money vertical bear put spread at your discretion
Closing Trades
2-11-2015
expiration date: February 20, 2015
Portfolio weighting: 10% each
You have the good fortune of waking up to a bounty of riches this morning.
Both Gilead Sciences (GILD) and the Japanese yen (FXY) have made gap moves in your favor overnight. Your long position in (GILD) saw a nice little $2 pop to the upside and your short in the (FXY) just got whacked in the knees, down a full $1.
As a result, the Trade Alert model-trading portfolio is now up +4% on the year. It?s not exactly knocking the ball out of the park, but should be enough to keep you in fine chardonnay for the rest of the year. And compared to most other suffering, money losing hedge fund traders this years, it is more than adequate.
Your existing positions in these two securities are now close to their maximum expiration value. However, as is so often the case with deep in the money options with only days to expiration, they have become highly illiquid.
For example, the February (FXY) $87 puts are trading at $6.00-$6.90 on the screen, against an intrinsic value of $6.22 ($87 - $80.78 in the cash market = $6.22). So a market order to sell would most likely wipe out your entire profit.
So I am going to run my positions into expiration, given that we only have six trading days to go. These are my last two positions, so I also have an excess of cash.
I am trying to maintain some discipline here and restrict myself to only buying low and selling high. I know this sounds revolutionary, but it should work. Like you, I am not paid according to the volume of Trade Alerts I issue, only on their end results.
However, this market has shown a pronounced tendency to giveth, and then abruptly taketh away. So, if you don?t want to wait until next week to collect your cash and free up margin, you can put in some high limit orders to sell.
The Gilead Sciences (GILD) February, 2015 $35-$37 in-the-money bear put spread has an intrinsic value here of $5.00, so you can probably get a $4.95 offer done.
The Currency Shares Japanese Yen Trust (FXY) February, 2015 $84-$87 in-the-money vertical bear put spread has an intrinsic of $3.00, so $3.97 probably gets executed. If it doesn?t just re-enter the order tomorrow and try again, or lower your limit by a penny.
These are the orders you need to execute:
Sell 23 X February, 2015 (GILD) $87.50 calls
Buy to cover short 23 X February, 2015 (GILD) $92.50 calls
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Sell 38 February, 2015 (FXY) $87 puts
Buy to cover short 38 February, 2015 (FXY) $84 puts
I?ll run the P&L?s after the February 20 expiration.
Congratulations, and on to the next one.
Time for another Dose of Gilead Sciences
